Whole of life policies can be a very useful tool in providing the funds to meet a client's IHT liability, but don't policy reviews mean increasing premiums? Not with LifeTime+
Budget note 25 made it clear that estate planning will now be more important than ever. But whilst the whole business of IHT is proving very unsettling for many, there is an upside – the well publicised changes to IHT taxation of trusts mean that your clients can no longer turn a blind eye, and should take an active role in planning for what happens to their estate after they die. LifeTime+ can provide some of the peace of mind they may be looking for.
A complex problem
The Finance Act 2006 has made it more difficult to avoid IHT, and due to the complexity of the matter, sound financial advice is now crucial. It raises many questions: How can a client make best use of their Nil-Rate Band? Should assets be put into trust? If so, do the tax advantages of an Absolute Trust outweigh the adaptability of a Flexible Trust? How do you find the funds to actually pay the tax?.
A simple solution
A useful tool to provide these funds is a whole of life policy. Obviously, for IHT-planning purposes, it would have to be put into trust, and it would be down to the adviser to determine, with their client, which trust to use. Many clients are very keen to ensure they don’t become a financial burden after their death. With a whole of life policy like Liverpool Victoria’s LifeTime+ in place, they have the reassurance that funds will be available to meet expenses, including a possibly hefty IHT liability.
There are quite a few providers around offering whole of life policies – so why choose Liverpool Victoria? There are a number of good reasons:
Peace of mind built in.
Liverpool Victoria believes that life cover should be all about peace of mind – and being exposed to the ups and downs of the stockmarket is not suitable for every client. LifeTime+ is a competitively priced, non-investment linked, whole of life policy, which has no cash-in value at any time.
Reflecting Liverpool Victoria’s mutual principals, the plan’s premiums and sum assured are both guaranteed. In order to offer some protection against inflation, besides level cover, LifeTime+ offers index-linked cover, where premiums will increase in line with The Retail Prices Index, as will the sum assured.
Unit-linked products normally depend on stockmarket performance and therefore may offer the potential for an increasing sum assured. However, the adviser needs to evaluate if their client understands that a reviewable premium has an added risk of premiums increasing.
Bearing in mind that many people will need to continue payments throughout their life and well into retirement, it might be worthwhile choosing a plan that offers guaranteed premiums, so that once the plan has been taken out, the policyholder won’t have to worry about it anymore.
Longterm flexibility
And what about guaranteed insurability options (GIOs) where the amount of cover can be increased without further underwriting? LifeTime+ is ideally suited to estate planning,so GIOs specifically include changes in IHT legislation and cater for the receipt of an inheritance.
Information for IFAs
Liverpool Victoria’s commitment to the intermediary market doesn’t stop here. They have specifically created literature covering many of the key issues concerning Inheritance Tax planning, and are holding IHT seminars throughout the UK to explain the recent changes in legislation. So advisers can now feel confident when looking at the different options available to their clients.
Budget Note 25 has had quite an impact on estate planning – now’s the time to demonstrate just how important good advice is.
Liverpool Victoria Life Company Limited registered in England No. 597740, authorised and regulated by the Financial Services Authority, entered on the Financial Services Authority Register, No. 110423. Registered address: County Gates, Bournemouth BH1 2NF. Tel: 01202 292333.
